I am retired from FCC where I worked almost 25 years in the spectrum policy area and now am an independent consultant on complex spectrum policy issues for innovative technologies. While at FCC I proposed and directed the policy development that was the foundation for Wi-Fi and Bluetooth a few years later. Thus I have a lot of experience on the interface of regulation and innovation.
In the next few posts I will elaborate on issues that came up at the conference. The first topic will be funding innovation in a regulated environment.
Many of the technical changes that have had a large impact on our whole economy have been “disruptive innovation” created by startup companies. Indeed, this is what has made “Silicon Valley” a phrase known worldwide. Usually such innovations require: a good technical idea, capital for R&D – often at least partially from venture capitalists (VCs), and R&D. In most fields not subject to special regulation a new product or service can reach the market quickly if the R&D is successful: without government approval or with only simple routine approvals. But many communications technologies, particularly innovative wireless systems, need very nonroutine approvals from FCC. This was certainly the case for ultrawideband (UWB), Northpoint/MVDDS, AWS-3, and TV white space/TVBD. In all cases the FCC deliberations have been endless and without any particular schedule.
Sections 7 and 10 of the Communications Act of 1934 attempt to set schedules for such deliberations. The very day of the conference FCC lawyers had to defend in the Appeals Court their inability to meet the Section 10 deadlines in the AWS-3 proceeding. FCC has consistently ignored the Section 7 deadlines in the 20+ years since it was adopted, indeed it usually acts as if Section 7 doesn't exist in the in the U.S.C. copies at FCC!
This lack of any schedule or reasonable timeline expectation for innovative technology consideration at FCC is a major disincentive for the capital formation needed to explore innovative communications technologies that need nonroutine approvals – even at times when capital is generally available. Given the current credit situation it may make this capital almost impossible to get.
The FCC used to have a Pioneer's Preference program that recognized the special problems of radio technology and regulatory approval. That program was mismanaged and Congress decided it wasn't needed after this mismanagement became apparent and it appeared that spectrum auctions and deregulation would solve most of the original concerns about market access for new technology. However in the decade since the program ended it is clear that the 4 new technologies enumerated above still faced large, time consuming, and costly regulatory battles against “dug in” incumbents before they achieved market access. Indeed, 2 of the 3 original UWB proponents failed within a year of the UWB decision so their original investors received zero return. Northpoint, the major MVDDS proponent, prevailed in the rulemaking but ended up with no real gain.
A few more Pyrrhic victories such as this for new technology and VC funding for new wireless radio technology subject to nonroutine approval will become impossible.
What to do? I urge the new FCC to establish a clear policy for timely consideration of innovative technologies. I urge Congress to reconsider Sections 7 and 10 and make them more pragmatic and to give FCC clear guidance that they expect the new legislation to be followed, not ignored!